How We’re Different

1. We help our investors see behind the curtain.

We believe that the vast majority of traditional investment products and services do not work in the interest of investors. Hidden agendas, conflicts of interest and obscured fees run rampant in the financial services industry. We educate our investors about the companies in our portfolios and help make them smarter consumers of financial products, too.

2. We eat our own cooking.

Our founder Cale Smith has significant personal investments in the portfolios he manages. Retz, too, has large investments in her Spoke Funds®. And both of us educate our investors on how we’re cooking via quarterly letters to investors, Twitter, a blog, and around the clock access.

3. We’re happy to talk about how we are compensated.

We are a fee-only firm. We get paid solely for managing the two portfolios we created. As a fee-only firm, we do not receive any compensation in the form of commissions, rebates, awards, finder’s fees, or bonuses.

The total annual fee to invest in our portfolios start at 0.95% of assets on an annual basis with an associated brokerage fee charged in addition. (Specifics can be found on pages 4 and 5 of our Form ADV Part 2.) So our compensation in dollar terms goes up or down depending on the performance of your account. Our fees are significantly less than the 1.73% fee the average actively managed domestic mutual fund charges.

4. Even your Mom would be proud of the way we built our portfolios.

Mutual funds and hedge funds take a “pooled” approach to managing money, lumping all investors’ money together in a giant pool. Among other problems, investors in those categories of funds have zero real-time visibility into what’s going on with their money.

We built our portfolios on a Spoke Fund® model – short for hub-and-spoke. Here’s a simple illustration. And here is the SpokeFund.com website for more info. Or just imagine a first grader drawing a picture of the solar system. The sun is the hub – nearly all of the life savings of our portfolio manager’s family, in this case – and the spokes lead to all the planets, which are our investors’ accounts. Any trades in the core portfolio are executed simultaneously across everyone’s account. Those accounts are secure, fully insured, and held by an independent company led by a former commissioner of the SEC.

Spoke Funds are similar to SMAs, or separately managed accounts, although there are some key differences – most notably the amount of net worth each manager has at stake. Other differences can be found here, too.

What’s all that mean? Accountability. Your portfolio manager here is accountable for his actions or lack thereof – if for no other reason than nearly all of his own money is being invested exactly the same way as yours. We’re all in it together. Plus, as an investor in our portfolios you get complete 24/7 transparency, total account security, three levels of insurance, lower fees, lower taxes, and the ability to customize your portfolio in several key ways. What’s not to like?

5. Our investors must come first.

Our firm is a fiduciary and an independent Registered Investment Adviser regulated by the states of Florida, Texas and California. Both federal and state law require that as a fiduciary, we must act solely in the best interest of our clients – even if that interest is in conflict with our own financial interests.

Unfortunately, only a small proportion of “financial advisers” are Registered Investment Advisers. Most so-called financial advisers are considered “broker-dealers” by the United States Securities and Exchange Commission (SEC). Broker-dealers are held to a lower standard of diligence on behalf of their clients. In fact, they are required by federal law to act in the best interest of their employer, not in the best interest of their clients.

6. We are obsessed with saving money.

Portfolio manager Cale Smith is so cheap he once drilled a hole in a nickel so he wouldn’t have to pay six cents for a washer. His car is so old he keeps losing his wife on left turns.

Pinching pennies matters, especially when investing for the long-term. Our portfolios minimize costs. The few trades we do make are done paying little to no commissions to the custodian. We have very specific control of tax lots for each of our investors’ accounts, which can reduce taxes by 50% in some cases. All investors’ documents are delivered online, too, to save us all a few more bucks. Every dollar we save you stays in your account and continues to compound for as long as you invest with us.

Inside our company, we are focused on maximizing a metric we call return-per-fee-dollar. It’s a gauge of a portfolio’s returns (in dollars) relative to the money spent to achieve them. Any fund with a ratio lower than 1 means you’re destroying your own wealth by investing in it. We want that ratio to be as high as possible for our investors, and not just because we’re idealistic do-gooders, but because we’re investors in our portfolios, too. See how that accountability thing works?

7. We’re like free-range chicken.

We’re not boxed in. When it comes to how we invest, we follow a value investing philosophy and are not restricted by silly restraints like most mutual funds. For instance, many of those funds can only invest in companies of a certain size, industry or location, or that trade only on a certain exchange, in order to be more easily sold by brokers. The number of shares a mutual fund can own in a certain company is also subject to restriction.

In contrast, ours are “go-anywhere” portfolios, meaning we invest in the best, most undervalued companies regardless of where we might find them. As a result, our portfolios hold significantly fewer positions than the average mutual fund. The Tarpon Folio currently holds stock in 16 companies, while the average mutual fund owns shares in 140 companies. To paraphrase Warren Buffett, how much sense does it really make to put money into your 73rd best idea?

8. Nobody pulls our strings.

We are an independent firm. We have no ties to Wall Street or any other companies, for that matter. Our firm’s partners own the entire company. We’re also located on an island in the Florida Keys, which unofficially seceded from the mainland U.S. in 1982. How much more independent can you get? Welcome to the Conch Republic.

9. We don’t want all of your money.

We’re not brokers or financial planners. You don’t need to transfer all of your worldly assets to our firm in order to invest with us. It’s a simple as signing up.

Unlike mutual funds, we like to know all of our investors. But you don’t need to spend hours organizing your personal financial files prior to joining us. We only provide one of all the possible financial services you might need – long-term investing. Any decisions about asset allocation or diversification are typically made before you invest with us.

From our perspective, one of the best things about our focus is that our business model is scalable. We can easily manage relatively small amounts of money for many people who are invested the same way. We don’t need to rely on big accounts from just a few people. (Don’t let that stop you from calling us, though, Mr. Gates.)

The minimum amount required to invest in our portfolios is $50,000. Please contact us for any questions on eligibility.

Some of our clients have invested every dime they’ve ever saved with us. Others view their account with us as a piece of a larger diversified portfolio. We leave the ultimate decision of how much to invest with us entirely up to you. We’re also happy to talk to your planner or adviser with you to help you decide what’s best.

We know we’ve got to earn your trust. Perhaps you’re interested in investing with us but have a long-term relationship with a planner who’s served you well. Maybe you’re hesitant to move your money because you’d rather avoid the confrontation and stress of firing your broker. (It happens more often than you might think.)

In either case, we’d encourage you to take us for a test drive. If you’re wondering what to do about those lousy mutual funds you own, consider investing the proceeds in a new account with us for a year. Compare your performance here to the mutual funds you hold on to, and then go from there as you see fit.

10. Every year we have a big party in Islamorada.

Drop us a line to learn more about our next Annual Investor Meeting. At the meeting we will report to our investors on portfolio performance, take all questions and in general be accountable for the decisions we’ve made with your money.